SEC Says XBRL Presents Business Boon, Not Burden - InformationWeek

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SEC Says XBRL Presents Business Boon, Not Burden

While XBRL has already been widely embraced by the SEC and most of its regulatory counterparts, XBRL will also liberate millions of financial executives, analysts and investment professionals from number-crunching drudgery.

Don't look at Extensible Business Reporting Language (XBRL) as an onerous financial reporting requirement waiting in the wings; look at it as an opportunity for better insight into competitors and financial markets. That was the upshot of the message delivered on December 5th in Philadelphia by Securities and Exchange Commission Chairman Christopher Cox.

The SEC and most of its regulatory counterparts internationally are embracing XBRL in large measure to make it easier to oversee public companies, but speaking before the 14th International XBRL Conference, Cox made a convincing case that XBRL will also liberate millions of financial executives, analysts and investment professionals from number-crunching drudgery so they can spend their time "performing subtle analyses and making careful judgments that machines can't replicate."

XBRL is an XML-based format for financial reporting that provides a computer-readable way to tag more than 2,000 financial data points such as cost, assets, net profit and other values. Because XBRL is standardized, it enables fast, automated analysis not only by regulators, but also by companies looking at specific competitors and across industries. The SEC has recommended that companies embrace XBRL for reporting quarterly and annual results, but has held off on a mandate - a move widely viewed as inevitable.

"Most companies looking at this are focusing on publishing and the costs and changes required to start submitting financials in XBRL" said conference attendee Trevor Walker, vice president of product marketing at performance management vendor Cartesis. "We're educating customers that there's no requirement for publishing for now, but they can take advantage of the benchmarking advantages of XBRL."

Cartesis' software can publish reports in XBRL, but it also ingests third-party XBRL-normalized data on public companies available from commercial publishers such as Edgar Online. Benchmarking this data enables fast analysis of competitors, markets and industry trends. "You might take last year's actual results and set performance goals to grow that by 30 percent, but what if the market is growing at 45 percent?" Walker said. "You could be conceding 15 percent market share in your base-level plan."

By using XBRL-based peer and competitive data, monitoring it on a regular basis and having it persist in your database, you can begin to calculate growth trends for your own company and your competitors. "You can be much more aggressive [or realistic] in how you put together your forward-looking forecasts and plans," Walker said.

Many BI and performance management software vendors now support XBRL-based publishing and analysis, and this week Information Builders joined that list, adding an adapter for its WebFocus platform that enables it to create, schedule, distribute and run parameterized, XBRL-based financial reports.

To give anyone and everyone a peek at XBRL, the SEC this week unveiled an Interactive Financial Report Viewer that serves up 10Qs and 10Ks that are voluntarily being submitted in the format. Cox told attendees at this week's conference that the SEC strongly supports and is financially backing the goal of XBRL-US to document every taxonomy that's necessary to produce financial statements for any industry using US GAAP by no later than mid-yr 2007.

Once taxonomies are in place, companies reporting their results in XBRL will not only be able to seamlessly convert (rather than reconcile) US GAAP reports to International XBRL reporting standards, Cox said "it's not hard to imagine that in the very near future, companies of all kinds will be able to rely on interactive data to flag anomalous data and fix accounting errors in real time."

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